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Emerging economies drive demand for discrete automation

01 January, 2008

The global market for automation systems used in discrete manufacturing is experiencing "solid growth" and will expand from $17bn in 2006, to more than $23bn by 2011 – a CAGR of 6.8%. The forecast comes in a new report from the ARC Advisory Group, which says that the growth is being driven mainly by the need for manufacturers to boost productivity, product quality and costs, safety, flexibility and delivery performance.

Previously, capital expenditure on automation equipment was driven by replacement cycles in the machinery sector. Now, the growth is now being fuelled by the increasing wealth of consumers in Asia and Eastern Europe, ARC suggests. The traditional five-year expenditure cycle is thus having only a ripple effect on longer-term sustained growth.

India and China are slowly moving towards producing higher valued products, with increasing vertical specialisation among local machine-builders. ARC says that foreign companies are establishing production centres in Asia to take advantage of this specialisation.

"One reason the automation business is doing so well today is the huge list of challenges and changing conditions in the global business environment that manufacturers must respond to," says the report’s principal author, senior analyst, Himanshu Shah. "These challenges include globalisation, the need to react quickly and with agility to emerging market opportunities, and increasing pressure to improve financial performance."

º  ARC has also been looking at the global market for automation systems used by the process industries. This sector is about twice the size of the discrete business – with sales predicted to expand from $30bn in 2006, to more than $47bn in 2011. This represents a CAGR of 9.6% over the five-year period.

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